Secretary-General Ban Ki-moon turned up at the AFICS/NY annual assembly (Thursday, 19 May 2016) for the first time in years. The SG has a warmth and joy that brings a breath of fresh air to the room. And he showed that he knows how to get to the heart of the matter, particularly when noting, to warm applause that “you can take the civil servant out of the UN but you can’t take the UN out of the civil servant” (link to webcast below).
A collective message of reassurance emanated
from the podium. From the AFICS/NY President: the AFICS/NY President and
Governing Board "are and will continue to be passionate advocates for your
concerns"; the Chair, AFICS/NY Pension Committee: the Fund has been
facing issues related to the MOU (last year) and investments and delayed pension
payments (this year), and the AFICS/NY Governing Board members are working hard
on your behalf; Fund CEO: the Fund Secretariat has faced issues with IPAS
implementation and rising volumes of new cases; however, the Fund is on track
to dispatch the backlog in payments to new retirees by 31 May 2016 as agreed
with the Department of Management; Representative of the Secretary-General for
Investments: “leaders of pension funds are dropping like flies; other funds
have a 7-l/2 per cent return objective, which is harder to meet; the Fund only
has a 3-l/2 per cent return target; which it hasn't met; but the total capital
preservation lost was 1 per cent last year and 1 per cent gained this year, and
the asset allocation policy is more conservative than before; thus our pensions
are safe
(When in order to make her point that our Fund is doing well compared to others, despite not achieving its 3.5 per cent return target, the RSG compares our Fund's real return rate of 3.5 per cent with other funds' nominal return rate of 7.5 per cent, she's comparing apples to oranges. Our Fund's nominal return rate is 6.5 per cent.)
Most notable among the comments at yesterday’s assembly: From the AFICS Pension Committee Chair: "The main investment classified as a hedge fund has been largely liquidated as a result of members’ expressed concerns;" from the RSG for Investments: letters from the Acting Chair and Chair of the Assets and Liabilities Monitoring Committee (addressed to the SG dated 11 February and 7 March) about “loud danger signals” of transactions carried out in an environment of “weakened investment governance and risk management” and “in violation of investment policy” contain “misunderstandings.” So does her statement to the last Assets and Liabilities Monitoring Committee meeting in 4-5 February that “possible changes to the Fund’s investment philosophy and approved UNJSPF risk appetite are being considered”, which proposed changes the Committee stated in its 7 March letter to the SG “do not seem to recognize the fiduciary obligation of the Secretary-General and the RSG to ‘achieve the maximum investment return within an acceptable level of risk”. "We've provided follow up information that the one transaction in question was properly authorized . . . ", the RSG said, "If we do anything to change the direction of the way in which the Fund is being managed, it will be to button things down even more; we're running a tight ship; we’re conservative; we have adopted a strategic asset allocation last year which is more conservative than the prior one and updated our risk budged accordingly, and it's more conservative than it was before."
Most notable among the comments at yesterday’s assembly: From the AFICS Pension Committee Chair: "The main investment classified as a hedge fund has been largely liquidated as a result of members’ expressed concerns;" from the RSG for Investments: letters from the Acting Chair and Chair of the Assets and Liabilities Monitoring Committee (addressed to the SG dated 11 February and 7 March) about “loud danger signals” of transactions carried out in an environment of “weakened investment governance and risk management” and “in violation of investment policy” contain “misunderstandings.” So does her statement to the last Assets and Liabilities Monitoring Committee meeting in 4-5 February that “possible changes to the Fund’s investment philosophy and approved UNJSPF risk appetite are being considered”, which proposed changes the Committee stated in its 7 March letter to the SG “do not seem to recognize the fiduciary obligation of the Secretary-General and the RSG to ‘achieve the maximum investment return within an acceptable level of risk”. "We've provided follow up information that the one transaction in question was properly authorized . . . ", the RSG said, "If we do anything to change the direction of the way in which the Fund is being managed, it will be to button things down even more; we're running a tight ship; we’re conservative; we have adopted a strategic asset allocation last year which is more conservative than the prior one and updated our risk budged accordingly, and it's more conservative than it was before."
In introducing and providing background for the
proposed revisions to the By-laws under ‘Other business’ we took the
opportunity at the meeting to recount the various threats to our pensions
beginning with the attempt in 2006-2007 to break the consensus rule and put the
indexing of the North American portfolio to a vote by simple majority, which
was approved by the Pension Board because it was pushed by a senior UN official
(disaster was averted simply because of bureaucratic inertia); culminating in
2014 with the revised Memorandum of Understanding which many, including our
staff federations, believed to pose risks for the strict separation of the
assets and liabilities sides of the Fund, one of the checks and balances that
has kept our Fund healthy when others have failed; and the 2015 leak to the media
of the Fund’s movement toward hedge funds and other riskier investments.
We also noted that the AFICS leadership does not
hold consultations with its members on any issue – at least not under the
current leadership; blocks attempts at increased openness, participation and
transparency; declined to convene a consultative meeting on the MOU and hedge
funds before the Pension Board meeting last year, as requested under the
by-laws by 82 AFICS members; selectively posts information on the AFICS
website; and has several times noted its disapproval of our use of the AFICS
directory to contact members about our efforts, although the directory is circulated
to members and the By-laws state promoting interactions among AFICS members as
one of the organization’s stated purposes. Word is that the AFICS directory of
member contacts (the current one is three years old and contains massive
numbers of errors in email addresses) may no longer include members’ email
addresses and telephone numbers, which seems to us to be a violation of the
By-laws.
Let us recall that while members’ concerns about
the MOU and hedge funds were dismissed by the AFICS/NY leadership, today we
have a situation of an MOU placed on hold by the Under-Secretary-General for
Management, permanently we hope, and the Fund’s investments in hedge funds have
been largely liquidated, as the Chair of the AFICS/NY Pension Committee stated
"as a result of members' expressed concerns"; and the RSG speaks of further
“buttoning down” rather than moving to riskier investments.
Despite reassurances from the podium, we must
continue to believe our own eyes, ears, and assessment, whether about the
dangers of the MOU as stated by our UN staff federations; about hedge
funds, as stated by the financial media; about a “selective and
deceptive” reporting of the causes and extent of the backlog in pension
payments in the Fund Secretariat, as reported by the former Chief of
Entitlements of the Fund, and fact-based calculations by the CCISUA President
of when the backlog can realistically expected to be eliminated (at least six
months after the 31 May 2016 date projected by the CEO); an Investment
Management Division operating in an environment of lax risk management and
compliance, as reported in letters to the Secretary-General by the Pension
Board Assets and Liabilities Monitoring Committee; and about staff in the
Investment Management Division made uncomfortable for delivering internal
investment assessments contradicting the RSG’s.
The AFICS/NY ‘President, on behalf of the
AFICS/NY Governing Board’ circulated a handout (link below) containing gross misrepresentations
of the actions and intentions of some of us involved in the effort to keep our
Fund healthy and to push AFICS toward more responsiveness and accountability to
its members. It’s disheartening when our efforts are mischaracterized and disparaged;
but such countermeasures are also a sign that our actions are having an impact.
Experience shows that when we push for change,
we sometimes get results. And if our efforts do result in positive and
longer-term change, let's be ready to recognize that as well. We're nowhere
close yet.
We will shortly present the AFICS leadership
with a formal request under the By-laws to convene an extraordinary assembly to
consider proposed revisions to the By-laws designed to move our representative
organization toward more transparency and accountability to its dues-paying
membership. We’ll keep you posted.
For the handout by the AFICS/NY President and Governing Board, go to the AFICS website and click 'Handout' in the top right hand (under 'Latest News')
http://www.un.org/other/afics/
No comments:
Post a Comment